Insurers exclude Venezuela from cover under war risks insurance policies

Jun 18, 2009 02:00 AM

Venezuela has become the first South American country to be excluded from annual cover under war risks insurance policies for 20 years following Hugo Chavez's confiscation of offshore vessels and other oil assets.
London underwriters have added Venezuela and an economic zone out to Isla Aves, about 350 miles (564 km) off the coast, to the list of at risk areas. The at risk area includes Lake Maracaibo.

The move follows the expropriation by Venezuela of offshore oil related assets including 11 Tidewater vessels, up to 300 other craft, two US gas installations and various shore facilities. Confiscation or expropriation is among the perils covered by war risks policies putting underwriters in the Lloyd's and London company market at risk. It is not yet clear if underwriters are charging additional premiums to reinstate cover for vessels trading to Venezuela.
The move to exclude Venezuela from annual cover was taken by London underwriters but their views strongly influence insurers in other markets. It is arguable that a tanker or containership is at little or no risk as government action has so far been directed at the offshore industry.

Venezuela has previously nationalised ports and airports as well as agricultural operations. State oil company PdVSA has taken on the confiscated assets and businesses.
Tidewater which has traded in Venezuela for 50 years indicated in May that it expects compensation for the confiscation of its vessels and $ 40 mm of unpaid invoices. Tidewater said the seizure was executed without violence and some of the Tidewater employees have gone to work for PdVSA.

Areas so far excluded from annual war risks cover have been parts of Asia, Africa and the Middle East where ships are at risk of attack as a result of insurgency or piracy.
South America has not figured in the excluded areas list since the invasions of Grenada and Panama and the Falklands war in the 1980s.

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